Will Spinoff Mean a Better, Cheaper Nook?

By Quentin Fottrell

Whether Barnes & Noble’s will improve its fortunes by separating its dead trees from its digital books is unclear. But some analysts say spinning off the Nook into a separate business will likely be a boon for e-reader buyers in the form of better hardware at lower prices.

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The bookstore giant is suffering like many other bricks-and-mortar outposts — Borders finally succumbed to bankruptcy late last year, primarily due to competition from the likes of online retailers such as Amazon.com, experts say. The Nook is potentially the jewel in Barnes & Noble’s crown, but e-book readers still have cheaper choices such as Amazon’s $70 Kindle. And the Nook Tablet costs $249, less than the $499 for Apple’s more sophisticated iPad 2, but $50 more than the rival Amazon Kindle Fire.

If the spinoff succeeds, experts say the Nook will likely undergo a transformation. Company management wants to unlock the value in the Nook for investors, but this will also lead to more money and brainpower invested in the Nook itself, says technology entrepreneur Matt Wallaert. “Why shackle a winning product to a losing company?” he says. “Any time that you can concentrate on a product, it usually results in better products. It means you will come out with a bigger, better, badder Nook.”

The Nook has a head start on its main rival. It’s pricier than the Kindle Fire, but analysts say superior to Amazon’s reader in some respects. It has 16 gigabytes of memory — twice the memory than the eight-gigabyte Kindle Fire –and better battery life. The Nook also comes with free in-store customer support Hulu Plus and Netflix apps pre-loaded – although users still need to pay for them.

But analysts argue that Barnes & Noble needs to find new ways to make the Nook appealing to price-conscious customers. Louis Ramirez, senior feature writer for Dealnews.com, says that website’s archives show that the Kindle has more aggressive price cuts than the Nook. At $109, the latest non-subsidized Kindle is 21% lower than the previous generation Kindle. “The Nook simply doesn’t get those kinds of steep of price cuts,” he says. “One way Barnes & Noble will fight back is by giving the Nook more features than the Kindle.” “Barnes & Noble won’t give up without a fight,” Ramirez says.

The spinoff is unlikely to share the fate of Netflix’s failed attempt to separate its online streaming and DVD-by-mail businesses last year, experts say. The abandoned spinoff, which was coupled with a price hike, infuriated customers. “They don’t compare,” Ramirez says. “Netflix was trying secretly to wash its hands of the DVD business. Barnes & Noble wants to hold onto and focus solely on the Nook.”

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